Shares of Reddit Inc (NYSE:RDDT) rose 15% to approximately $182 on Friday after the company was announced to join the S&P 500 index next week. The inclusion, set for August 18, will replace AvalonBay Communities (NYSE:AVB), which is being acquired by Equity Residential (NYSE:EQR), making it ineligible for the index.
Key Details
The addition of Reddit to the S&P 500 will compel index-tracking funds to purchase shares of the social media platform, which has a market capitalization of around $30 billion. This move positions Reddit as one of the largest publicly traded companies in the U.S. and the second pure-play social media firm in the index, following Meta Platforms Inc (NASDAQ:META). Earlier this year, Pinterest and Snap were also included, but their market capitalizations were significantly lower than Reddit's.
Background
Reddit's stock performance follows strong financial results reported for the second quarter, where the company achieved a 61% year-on-year revenue increase to $804.9 million and a net income jump of 183% to $252.85 million. Daily active users rose by 18% to 130.3 million, while weekly active users increased by 24% to 514.6 million. Despite these gains, concerns remain regarding user growth stability and the company's reliance on search engine traffic, especially as competition from AI technologies increases.
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The inclusion of Reddit in the S&P 500 is likely to generate substantial demand for its shares from institutional investors, particularly those managing passive funds that track the index. This could lead to further price increases in the short term. Watch for Reddit's upcoming earnings report, where the company is expected to provide guidance of $860 million to $870 million in revenue for the current quarter.
Based on reporting by: forbes.com, livemint.com